Ferrous

NO SPRING IN THE MARKET YET

The calendar may indicate that it’s spring, but as of mid-April there wasn’t much spring in the step of the ferrous scrap market for companies that process and sell the material.

The closest thing to positive news reported by scrap recyclers was that export demand was helping to keep some scrap moving out of yards. The export market also may be helping to keep a floor on scrap prices.

Any positive results from the export activity were not reflected during the April buying period. The spot market for ferrous scrap remained a buyer’s market in April, as mills were able to pay as much as $43 per ton less for ferrous scrap in the first half of the month.

Transaction pricing compiled by Management Science Associates Inc. (MSA) for its Raw Material Data Aggregation Service (RMDAS) showed national spot market buyers paid $167 per ton on average for prompt industrial grades of ferrous scrap—the lowest number seen since November of 2008.

Nationally, buyers paid more for No. 2 shredded scrap on average than they did for prompt grades. No. 2 shredded scrap sold for $175 per ton nationally and for roughly the same price across all three RMDAS geographic regions.

All three of the grades for which MSA discloses monthly averages—No. 2 shredded scrap, the prompt industrial composite and No. 1 heavy melting steel (HMS)—lost value in the April spot market compared to March.

Regionally, scrap sellers in the North Central/East region noticed the sharpest decline, with industrial grades falling $43 per ton, and No. 2 shredded scrap dropping $26 per ton.

Scrap recyclers continued to report very little buying taking place in April, although some have reported that export demand seems to have been growing in early spring.

"Export demand is good," says a recycler in the Mid-Atlantic states. "Turkish mills are buying bulk cargo loads off the East Coast, and brokers are in the market seeking container loads of ferrous scrap."

The brokers seeking containerized ferrous scrap have been willing to buy a wide range of ferrous grades, says the recycler. "Shredded scrap and turnings are the easiest to load from an operations viewpoint, but there is also a market for plate and structural and even No. 1 heavy melting scrap bundles."

India is a common destination for ferrous container shipments, although recyclers in the western United States are also finding markets in China, Taiwan, South Korea and Vietnam.

The domestic demand picture remains weak and appears likely to remain so until Americans begin buying more cars, appliances or—at some mills—if highway spending helps the rebar market kick in.

"There is a little bit of domestic buying in our region, but that’s hand-to-mouth, and even for an order that’s placed, they may tell you to put a hold on shipping it," says a recycler in the eastern United States.

"The integrated mills are just idled, it seems like Nucor has just bought from its own yards for about five months, and Gerdau is not taking much in," he adds. "One of the brokers we work with told me he has not loaded a railcar for a domestic shipment to the Midwest for three months—the only arrangements he’s making are for export."

In the United States, steel is being produced at roughly half of the pace it enjoyed in 2008. Slightly more than 1 million tons of steel were produced at mills in the United States in the week ending April 11, 2009, compared to more than 2.1 million tons in the week ending April 11, 2008, according to the American Iron and Steel Institute, Washington, D.C.

The 43.3 percent steel mill capability utilization rate for the week ending April 11, 2009, is at least higher than that of the week before, when just 965,000 tons of steel were made for a 40.4 percent utilization rate.

But the year-to-date figures for American steelmaking remain gloomy, with 14.7 million tons having been produced in the same three-and-half-month time frame when 31.1 million tons were produced last year.

In China, now the world’s largest steel producing nation by far, there are some signs of health in the manufacturing and steel sectors of the economy.

Crude steel production in China in March of 2009 was down only slightly from where it stood in March of 2008—a far different scenario than what has unfolded in the U.S.

According to China’s National Bureau of Statistics, the nation’s steelmakers produced 45.1 million tons of crude steel in March 2009, just 0.3 percent lower than in March of 2008.